More than just entrepreneurs, business owners are consumers as well—savvy consumers. You routinely evaluate many products and services needed to keep your business running smoothly. Selecting a payments partner is a critical business decision. Making an informed choice doesn’t require becoming a credit card processing expert. To understand how the credit card payment process works, we’ll look at the actors and their roles within payment processing. So let’s “follow the dollar” of a payment transaction.
A cardholder obtains a credit or debit card from an issuing bank and uses the card to pay for goods or services. A cardholder is most often an individual consumer, but it can also be another business or organization.
A merchant is any type of business that accepts card payments in return for their goods or services. More than thirty million U.S. small business owners are merchants, and they are the heroes that form the backbone of our communities.
A merchant bank establishes and maintains merchant accounts. Merchant banks allow merchants to accept deposits generated by credit and debit card payments.
Payment processors are companies that process credit and debit card transactions on behalf of merchants and their merchant banks.
Issuing banks are the banks, credit unions, and other financial institutions that issue debit and credit cards to cardholders through the card associations.
Card associations are the card brands such as Visa, Mastercard, Discover and American Express. The card associations act as a clearinghouse for their respective card brands and as governing bodies of payments processing. The card associations set interchange rates and qualification guidelines, and act as the arbiter between issuing banks and acquiring banks.
Credit card processing can be broken down to three distinct processes: authorization, settlement and funding.
First, let’s look at the process of authorization.
Now let’s look at settlement and funding.
You are now equipped with the essence of how credit card processing works. To learn more about the impact this process can have on your practice, contact a Dentrix expert today at 800.336.8749 or visit https://www.dentrix.com/pay